Ah, admin. It’s one of the trade-offs we freelancers make in return for flexibility. When you’re employed by a company, HR and Accounts take care of all your admin for you. Not so when you strike out on your own.
If you don’t get your admin sorted in a timely fashion, all that behind-the-scenes paperwork really can stack up. Plus, HMRC and Companies House are quick to slap down fines if you miss their deadlines or file something inaccurately. And nobody wants to be in the Government’s bad books.
So, to help you out, here’s a quick guide to what you should be doing, and when:
WHEN YOU FIRST SET UP
- Self-employed or limited company? This is one of the first decisions you'll need to make, and both options have advantages and disadvantages. Becoming a sole trader tends to be quicker and simpler – you just need to set up with HMRC within your first three months of trading. Registering a limited company is a bit more complex, with PAYE, VAT and corporation tax to think about. On the flipside, limited companies can be more tax efficient, as you'll pay corporation tax and take dividends, rather than paying income tax on earnings. It's worth having a chat with a small business accountant to decide on the best option for you.
- Register with HMRC. As a self-employed person or limited company, you need to do your own taxes. This means setting up a Government Gateway account with HMRC and registering for self-assessment. It sounds arduous, but it’s honestly not that difficult. It doesn’t even take that long. Get it out of the way and off your mind. Oh, and choose a password you’ll remember – you’ll have to log into your Gateway more than you’d expect.
- Get insurance. Even if you don’t think you need insurance, it’s worth looking into. There’s no real safety net for self-employed people. Insurance gives you peace of mind and will save you from getting into difficulties if (heaven forbid) you are liable for anything that goes wrong in the course of your work. Check out our blog on freelance insurance for more on the different options.
- Set up your accounting process. There are several ways to keep track of your accounts. You might use accounting software, use old-fashioned excel, or hire an accountant. Whatever you decide to do, it’s vital to keep track of incomings and outgoings from the get-go.
- Meet deadlines. Do the work you’ve been hired to do. Meet or work towards your deadlines. This sounds obvious, but we have to include it! If you struggle with time management, have a read of our blog on being a time management ninja.
- Keep your accounts up to date. Note down incomings and outgoings, file expenses receipts, do whatever you need to do to keep your books in order. Yes, it’s dull as dishwater, but try to do it regularly, otherwise you’re going to have an almighty task on your hands!
- Invoicing. How and when you invoice is up to you. It’s worth agreeing a payment schedule for invoices and expenses before starting any work for a client, and agree payment terms that suit you both. This will let you know roughly when money will be coming in and allow you to budget accordingly. You may also need to chase invoices sometimes, so be prepared to schedule some extra admin time for this one. The Work Crowd is a massive help here, as we can help you hunt down any delayed funds.
- VAT. If your business has an annual turnover exceeding £85,000 a year, you need to be VAT registered. You can register voluntarily for VAT if you feel like it (doing so is a good idea if you’re anticipating a growth spurt, but it does add a hefty chunk of admin to your workload). You pay VAT to the Government for every three-month period, and after the period ends, you have a month in which to pay. It can come around quickly, so this is one to schedule in the diary.
- Income tax. Self-assessment tax statements need to be in by the end of January, but it’s a good idea to get them done at the end of the tax year (April). The earlier HMRC processes your taxes, the better prepared you’ll be with your tax status going forward into the new tax year. This is where all that rigorous accounting you’ve been doing weekly pays off. If your accounts are clear, you’ll sail through your tax return.
- Corporation tax. If you’ve registered as a limited company, you also need to file your accounts to Companies House, so they know how much corporation tax you need to pay. Your business tax year will probably be different to the normal tax year, as it depends on when you started your business. You’re also likely to need an accountant to help you with the paperwork involved. Companies House gives you nine months after your company year-end to file your accounts and after that nine months, you have an additional day to pay up. But the sooner you get it out of the way, the better, so you’re less likely to spend what you owe!
- Confirmation statement. If you’ve decided to register your business as a limited company, you’ll also need to send an annual Confirmation Statement to Companies House. The purpose of this is basically to confirm that the government has the right information about your company. It doesn’t take long to do, but the fines and punishments are heavy if you forget. You also have to pay a small admin charge for the privilege (£13 last time we checked).
- Insurance review. Your insurance company should contact you annually to check that everything’s still tickety boo with your policy. It’s worth giving the documents a quick once-over just to check that your business and your policy still match up, and that you’re not paying for something you don’t need.
Not all of these apply to every freelancer. The bigger your operation and the better your turnover, the more admin you’ll have to do. Certain types of freelancers may have other admin tasks to consider as well, for example, some freelancers may have to renew or review certain licences. But we’ve covered the big hitters. Schedule alerts, note deadlines in your calendar – whatever works for you. But trust us when we say that keeping on top of admin will give you peace of mind and help you to concentrate on the job you love.
Winning and organising your projects through The Work Crowd is one way of keeping your admin to a minimum. We help you to send and chase invoices, keep track of your projects and collaborate with other freelancers on bigger projects. For more on how it works, drop us a line at firstname.lastname@example.org or give us a call on 020 3828 8440